30 April 2019

At its meeting on 30 April 2019, the Monetary Council reviewed the latest economic and financial developments and decided on the following structure of central bank interest rates with effect from 1 May 2019:

Central bank instrument Interest rate Previous interest rate (percent) Change (basis points) New interest rate (percent)
Central bank base rate   0.90 No change 0.90
O/N deposit rate Central bank base rate minus 0.95 percentage points -0.05 No change -0.05
O/N collateralised lending rate Central bank base rate plus 0.00 percentage points 0.90 No change 0.90
One-week collateralised lending rate Central bank base rate plus 0.00 percentage points 0.90 No change 0.90


The Magyar Nemzeti Bank’s (MNB) single anchor is inflation, its primary objective is to achieve and maintain price stability. In March 2019, inflation stood at 3.7 percent and core inflation at 3.8 percent. Core inflation excluding indirect tax effects rose from 3.2 percent in February to 3.5 percent in March. The rise in core inflation partly reflected an increase in excise taxes on tobacco products at the beginning of 2019, while the rise in fuel prices also contributed to a pick-up in the consumer price index. Regarding developments in core inflation excluding indirect tax effects, market services inflation remained broadly unchanged in March; and the increase in tradables prices reflected a few individual, volatile items.

Inflation continues to show large volatility. Therefore, in assessing the outlook, the Monetary Council pays more attention to developments in the measures of underlying inflation capturing persistent trends. A dichotomy is observed between the factors determining likely developments in inflation and core inflation excluding indirect tax effects. Persistently buoyant domestic demand is boosting, and weakening external activity is restraining the pace of price increase. In the coming quarters, inflation will fluctuate around the 3 percent central bank target. Core inflation excluding indirect tax effects is expected to continue to rise until the autumn months and then to decline from the end of 2019.

In 2018, the Hungarian economy grew by 4.9 percent, which was largely supported by the strong expansion in corporate and household lending. Based on the indicators received at the beginning of the year, growth in household consumption and investment is likely to continue this year. Labour demand remained strong, and the unemployment rate was close to its historically low level. The country’s current account balance grew in February 2019, reflecting a stable services balance and renewed increase in the balance of goods.

Economic growth is expected to slow gradually from 2019, but to remain strong. As a result of further dynamic growth in credit markets, the investment rate is likely to stabilise at high levels. Higher real incomes are expected to contribute to a further expansion in household consumption and savings. Regarding long-term, sustainable economic growth, the improvement in competitiveness by structural measures will be given increasing emphasis.

The outlook for world economic activity and inflation continues to be moderate. Monetary policies across the world’s leading central banks remain cautious. Consistent with the downside risks related to the economic activity in Europe and inflation in the euro area, in March the European Central Bank (ECB) shifted its first interest rate hike to a later date. As a result of this and the ECB’s balance sheet policy, monetary conditions in the euro area will remain loose for a longer period of time than earlier expected.

Sentiment in international financial markets has been more favourable than earlier in the period since the Council’s previous interest rate decision. Risk appetite was influenced by developments in international trade policies, uncertainties related to the Brexit agreement and measures taken by the world’s leading central banks. Oil prices have risen since March.

The Monetary Council left monetary conditions unchanged. Accordingly, the Council maintained the base rate, the overnight collateralised lending rate and the one-week collateralised lending rate at 0.9 percent and the overnight deposit rate at -0.05 percent. In March, the Council set the average amount of liquidity to be crowded-out for the second quarter of 2019 at least at HUF 300-500 billion and will take this into account in setting the stock of central bank swap instruments.

To improve the effectiveness of monetary policy transmission, the Monetary Council will launch its corporate bond purchasing programme with a total amount of HUF 300 billion on 1 July 2019. By introducing the Bond Funding for Growth Scheme (BGS), the Council’s specific objective is to promote the diversification of funding to the domestic corporate sector. The MNB will neutralise excess liquidity arising from the bond purchases by using the preferential deposit facility bearing interest at the central bank base rate. The new programme complements the Funding for Growth Scheme Fix launched at the beginning of 2019.

In its decisions, the Monetary Council focuses on the maintenance of price stability. The monetary policy stance will continue to be accommodative, economic agents’ financing costs will remain favourable. A dichotomy is observed between the factors determining developments in inflation. Persistently buoyant domestic demand is boosting, and weakening external activity is restraining the pace of price increase. The Monetary Council will assess the effects of this on the maintenance of price stability over the 5-8 quarter horizon of monetary policy. In its monetary policy decisions, the Council applies a cautious approach, relying mainly on the comprehensive projections for the macroeconomy and inflation in the quarterly published Inflation Report.

The abridged minutes of today’s Council meeting will be published at 2 p.m. on 15 May 2019.

Monetary Council